EQUITY

12 Months Ended

Dec. 31, 2020

On the Effective Date, all our Predecessor common and preferred stock, including contracts on our equity were cancelled pursuant to the Plan and 83.3 million shares of new common stock were issued. See Note 2 Chapter 11 Proceedings for further information.

The following is a summary of changes in our common stock outstanding:


			Common Stock
			(in thousands)
Balance, December 31, 2018 (Predecessor)			48,650
Issued			694
Cancelled			(168)
Balance, December 31, 2019 (Predecessor)			49,176
Issued			451
Predecessor shares cancelled			(49,627)
Balance, October 31, 2020 (Predecessor)			—
Share Issuance			83,321

Balance, October 31, 2020 (Successor)			83,321
Share Issuance			—
Balance, December 31, 2020 (Successor)			83,321

Predecessor Employee Stock Purchase Plan

On May 26, 2020, our California Resources Corporation 2014 Employee Stock Purchase Plan was terminated by our then Board of Directors. No additional shares were issued under the plan after March 31, 2020.

Warrants

On the Effective Date, we issued Warrants for an aggregate 4.4 million shares of Successor common stock. The Warrants are exercisable for 5% of the outstanding shares of new common stock (on a fully diluted basis calculated immediately after the Effective Date) at an initial exercise price of $36 per share. The Warrants are exercisable from the Effective Date for a period of four years. The Warrant Agreement contains customary anti-dilution adjustments in the event of any stock split, reverse stock split, stock dividend, equity awards under the 2021 Incentive Plan or other distributions. The warrant holder may elect, in its sole discretion, to pay cash or to exercise on a cashless basis, pursuant to which the holder will not be required to pay cash for shares of common stock upon exercise of the warrant but will instead receive fewer shares.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consisted of unrealized losses associated with our pension and postretirement benefit plans for all periods presented. The elimination of Predecessor equity balances as part of fresh start accounting resulted in a reclassification of $23 million of accumulated other comprehensive loss to additional paid-in capital upon emergence. See Note 3 Fresh Start Accounting for additional information.

Unregistered Issuance of Equity Securities

Other than the shares issued in reliance of Section 4(a)(2) of the Securities Act as described below, we relied on Section 1145(a)(1) of the Bankruptcy Code as an exemption from the registration requirements of the Securities Act for the issuance of our new common stock and warrants. Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under a plan of reorganization from registration under Section 5 of the Securities Act and state laws if three principal requirements are satisfied:

•The securities must be issued under a plan of reorganization by the debtor, its successor under a plan, or an affiliate participating in a joint plan of reorganization with the debtor;

•The recipients of the securities must hold a claim against, an interest in, or a claim for administrative expense in the case concerning the debtor or such affiliate; and

•The securities must be issued either (a) in exchange for the recipient’s claim against, interest in or claim for administrative expense in the case concerning the debtor or such affiliate or (b) principally in such exchange and partly for cash or property.

The (a) shares of new common stock issued pursuant to the Backstop Commitment Agreement, (b) shares of new common stock issued in connection with the payment of the backstop commitment premium and the exit fee for the Junior DIP Facility, and (c) Ares Settlement Stock issued to Ares pursuant to the Settlement Agreement were issued in each case without registration in reliance upon the exemption set forth in Section 4(a)(2) of the Securities Act and are therefore “restricted securities.”

On the Effective Date, we entered into a registration rights agreement with the backstop parties under the Backstop Commitment Agreement and each holder of at least 1% of the new common stock outstanding on the Effective Date, granting such parties customary registration rights with respect to their new common stock.